|
Quote: |
|
 |
|
|
<<why wouldn't you use the trend in the daily chart to increase your trade size when price moves in that direction in the lower timeframe charts (i.e., the one you trade off)? >> .......... |
|
|
|
|
Suppose I trade 3 contracts on a trade if it is in tune with the daily chart. That is, for example, the daily trend is up so I trade 3 contracts when going long. On a short signal I only trade 1.
1. Subconsciously I have told myself to trust my long signals 3 x's as much as my shorts. Conversely, I have told myself to distrust my short signals in such a way as to trade 1/3 the position.
2. If I am 1/3 less confident in my short signals, why am I taking them at all? If I believed it to be a good trade, then it should not be relocated to a lesser position size. Hence I have already added a negative bias to my trading and a self-fulfilling prophecy.
3. If you can't trade with the same size on both signals, why trade the lesser one? You are setting up a hierarchy for trade signals. But why trade anything less than the top of the ladder? Need more trades, or more money? TRADE MORE MARKETS. And trade them only in the direction of the trend.
This is the problem, form my point of view with using a daily chart to trade smaller timeframe intra-day. If you believe that trend is one of the small edges afforded the retail trader, it makes little sense to go short when the daily trend is clearly up.
But we know that an up trend can have down days. It can have down weeks for that matter. It takes away ones ability to make money if he is only trading on the side of the daily trend. Movement is important and that movement can be counter to the larger daily trend and still be tradable.
I prefer to keep my trend-frame small: 15 mins. and my trade-frame smaller: 5mins. I can thus trade counter to the larger daily trend, while still acknowledging the power of trends and fractal market structure.
As for the daily chart, its use in intra-day trading should be confined to support/resistance levels.